How to Dispute a Credit Report

A credit report is a record of your financial history, including your use of credit, your income, where you’ve lived, where you’ve worked, bankruptcies, defaults, foreclosures, and much more. It also contains your Social Security number and the account numbers for your credit cards, bank accounts, brokerage accounts, and mortgages. Sometimes, mistakes creep in, and it’s up to you to correct them.

In the U.S., the Big Three credit reporting agencies (CRAs) — Equifax, Experian, and TransUnion — compile credit reports and distribute them to lenders, creditors, landlords, employers, and others who need to assess your creditworthiness. The reports also form the basis of your credit scores which encapsulate your creditworthiness in a single number – actually, three numbers, one from each CRA.

Why Would a Consumer Want to Dispute Information on Their Credit Reports?

When mistakes and misinformation appear in your credit reports your credit scores can suffer, and your access to credit could become more expensive or even cease. Mistakes can be innocent, as when a number is transcribed incorrectly. They might also arise because of a disagreement between you and a creditor. A credit report might present just the creditor’s side of the controversy, but you have the right to add your side. If you succeed in clearing up the problem with your creditor you might need to lodge a dispute with the CRAs to have the item removed from your credit report.

Sometimes misinformation is the result of identity theft, when unauthorized individuals pose as you to use your credit cards, withdraw money from your bank account, or open up new credit accounts under your name. You could find yourself with hundreds or thousands of dollars of debt before you realize what’s occurred. If you don’t catch and correct it quickly then your credit score could plummet, and you might even find yourself as the object of a lawsuit from a misguided creditor.

How Does This Process Typically Work?

The Fair Credit Reporting Act (FCRA), the law that protects consumers of credit, requires the CRAs and their sources to make your credit reports complete and correct. This is what you can do to dispute items on your credit reports:

Send Dispute Letters to the Credit Bureaus

The Federal Trade Commission publishes sample letters you can use to dispute items on your credit reports. Always communicate with the CRAs in writing, not online or over the phone as that may undercut your rights. Send your material by registered mail with return receipt requested, and keep copies of every correspondence.

For each contested item, describe the facts, explain why you are disputing the item, attach relevant documentation, and request the item’s removal or correction. Attach a copy of your credit report with the disputed item highlighted. Send separate letters for each dispute, one to each CRA reporting the disputed item. Expect a reply within 30 days in writing. The CRA will share your information with its source, usually a creditor, and try to resolve the problem. If it decides in your favor it will correct your report, notify the other two CRAs, and will, at your request, send updated credit reports to all past recipients going back six months.

Escalate to Creditor

If the CRA doesn’t satisfy your request you can repeat the process, but this time with the creditor. It can take up to three months for this process to play out. If the creditor agrees with you it must notify the three CRAs who will update your credit reports and recalculate your credit scores.

Complete the Process

If you win the dispute you should request fresh copies of your credit reports and verify that they’ve been corrected. If you lose you can still send a 100-word explanation to the CRAs who must append it to your reports.

Can Consumers Do This on Their Own, or Do They Need to Work With a Credit Dispute Company?

You can certainly do this on your own, especially if you buy software specifically designed for this purpose. This software will offer dispute templates, keep track of your communications, prompt you when it’s time to take further actions, and offer other useful information. That being said, disputing items on your credit reports can be time consuming, so it might be worthwhile to hire a credit repair company to help you fix things up. Research these companies carefully, because some are not reputable. You shouldn’t have to make payments until the company properly performs services for you.

How Successful is This Process, and What Should the Expectations be for Consumers?

You can increase the probability of success by following the procedures carefully, furnishing relevant evidence, and remaining persistent. Don’t omit any details, and follow up in writing if you don’t hear from the CRA or creditor within a reasonable time – they often claim to lose correspondence. If you have the facts on your side you should have a good shot at success. You can, if you choose, use a lawyer who is an expert in FCRA cases (check the National Association of Consumer Advocates for a reputable lawyer). You can also submit a complaint to the Consumer Financial Protection Bureau (CFPB)– it will submit your complaint to the relevant parties and request a response. If your dispute is righteous you should expect to resolve it satisfactorily.

How Much Could a Consumer’s Credit Score Improve by Removing Inaccurate Information from the Credit Report?

It depends. Normally it takes seven years for derogatory information to be purged from you credit reports, so removing it sooner will certainly help your score. If it’s a major item, like a bankruptcy or tax lien, the improvement could be substantial, perhaps as much as 200 points for recent activities. Smaller corrections have smaller impacts, but even so, fixing mistakes could give you access to more credit at lower interest rates.

Has There Been an Important Legislation Related to Credit Report Disputes for Consumers?

We’ve already mentioned the Fair Credit Reporting Act which provides important safeguards regarding credit reporting. Three other important laws are:

Truth in Lending Act: Requires proper disclosure of the terms and costs of credit. Calculation of the annual percentage rate charged for credit is governed by this act.

The Fair Credit Billing Act: Part of the Truth in Lending Act, it protects you from unfair billing practices, such as charges for items you didn’t buy, incorrect charges, non-credited payments, and others.

Fair Debt Collection Practices Act: Controls debt collector practices and provides a way to gather the information you need to dispute a charge.

In addition, at the behest of the CFPB, the three CRAs now exclude civil judgements and tax liens from credit reports if the data doesn’t accurately identify the borrower, including date of birth, address, and Social Security number.